Macro and Microeconomic Factors Continue to Impact Biopharmaceutical Outsourcing Market During 2013 - 2019

Biopharmaceutical industry is one of the major contributors in global economic progress. Due to globalization, outsourcing of the biopharmaceutical processes has increased to great extent. Complexity of processes and technology oriented industry companies started finding it feasible for outsourcing processes to experts. Outsourcing also helped corporate in cost reduction and better focus on core business segments. Once considered as a cost saving alternative, outsourcing of biopharmaceutical business is now a strategic decision.

Biopharmaceutical market is very competitive and global players occupying majority of market share operate in same geographies. Although advent of generics is an opportunity for small pharma companies, it is major threat to branded drug manufacturers. It forces companies to invent new sources for revenue generation. Rising cost of drug discovery, regulatory policies and drug recalls have added to worries. Under such circumstances, biopharmaceutical companies have started outsourcing their non-core and some core businesses to externs. Due to complex nature of biopharmaceutical business, various outsourcing opportunities have been created across the value chain.

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One of the major problems that companies face in the era of globalization is the trade barriers to enter in a new market. Outsourcing can prove to be an important factor in overcoming the trade barriers and gain entry into to a foreign market. By outsourcing business, companies also gain access to new technology, with reduced investment cost. This dictates better operational and financial efficiency. Major outsourcing opportunities exist in drug discovery, clinical trial management and logistics, manufacturing, and distribution. Owing to global reach clinical trial management is one of the fastest growing outsourcing businesses in biopharmaceutical industry. Various companies have expertise in clinical trial logistics; some of them include Parexel, World Courier, DHL, Pharmaceutical Product Development, LLC, B&C Group, and Fisher Clinical Services. Outsourcing of research and development activities has also reduced the time-to-market time. Thus companies can launch new products at a shorter time span, thus developing competitive edge. With increasing trend in outsourcing manufacturing, original equipment manufacturing (OEM) business is growing rapidly. IT and packaging are also major areas where biopharmaceutical companies prefer outsourcing business. Rapidly developing technology and lack of expertise has given rise to services such as molecular imaging, companion diagnostics, construction of antibody library, cell line and biomarker development, and genomic testing. Various companies are taking the strategic decision for better business management. In 2011, Pfizer signed an agreement with Parexel for clinical development services; Astra Zeneca also signed a deal with IBM for IT outsourcing in 2013. Outsourcing also allows better resource utilization for maximum productivity. Geographically Asia-Pacific is expected to be the major point of focus for biopharmaceutical outsourcing market. India and China are the most preferred destinations for outsourcing, where large pool of skilled labor is available at lower cost. High costs in western countries have also a factor contributing to flow of biopharmaceutical outsourcing to Asia-Pacific region.

Biopharmaceutical outsourcing market also faces certain drawbacks. Outsourcing business comes with its own risk of credibility. In 2013, GlaxoSmithKline filed a lawsuit against Hospira, for not complying with quality standards. Hospira may pay USD 25 million to compensate the damage. Other factors restraining market growth are lack of control and coordination in processes, and real time process updates. To overcome these drawbacks proactive risk management and effective process control must be considered as prerequisites for outsourcing business.

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